You had a good quarter. What have been the key drivers? Which have made you jump into the black this quarter?

We have been working on transformation. Last year was a terrible year so we have to keep that in mind while comparing numbers.

The real story is the quarter to quarter change. We have seen a significant growth particularly in the advances. We grew close to 11% on the domestic side and around 5.8% on the international side adjusted for exchange rate with the rupee appreciating pretty much close to 10% so that has been good. The NPA numbers have largely remained to the forecast and the guidance we have given. Coverage ratios have improved and absolute amount of net NPA number has declined; so overall it is a fairly positive story.

Your gross NPA guidance for the full year rose from 43 to 46. Optically it may look up but if your gross NPA guidance is at 46 that means that at a net level we should see a marked improvement?

You can create a range of scenarios. One scenario that we all wanted to be is the resolutions of the large accounts happen and then a lot of changes has been done with respect to the rules and regulations. Also all banks have moved up in the maturity curve, in terms of dealing with non-performing accounts so if that scenario plays out then obviously the results are going to look good but in all our thought process we need to think about what could be a scenario if things do not hold out as a promise seems to be. So I would not at this point of time say more than this except to say that in a scenario where things do not work out exactly to the script we are looking at a Rs 3000 crore of further deterioration from this point of time.

What could go wrong? What is your biggest fear right now when you make these assumptions on your NPAs?

We are not expecting anything terribly to go wrong in the context of the recovery aspect. There could be a range of scenario from an extremely positive outcome to something that may not be that positive. But in so far as the risk in a financials are concerned there are couple of large accounts which still have not NPA but could potentially become one. There may be some challenges with some of the smaller accounts but by and large I think we should be on course as far as managing the portfolio is concerned.

For PSU banks, the large stressed pockets are power, infrastructure and to a large extent metal companies. The cycle there is reviving are you getting a sense that you will be able to benefit from that?

If you look at the sector, the cycle is improving. The EBITDA number per tonne of steel and other measures are all moving up but we still have to see that translate in the form of payment to the banks of the instalment and the principal portion.

Tell me what is the exposure at the top 30-40 accounts that the government has identified for resolution?

In general, Bank of Baroda's exposure to any of these large accounts is not more than say 2% of the total lending. The total borrowing those companies have in the market. We do not have any single company exposure that is beyond Rs 2000 crore. Ours is a fairly diversified portfolio so the outcome of the top 50 is not something that really worries us. If you look at our numbers we have around Rs 10000 crore of restructured assets that is an area to watch for and then outside of that we have what Rs 3000 to 4000 crore of loans that large ticket loans that we need to watch for but we are not so much vulnerable to the overall top 50 by virtue of the way the exposures have been taken.

How much provisioning have you made for these top 50 accounts?

Our total provision ratio is close to 58%. We have reasonably well provided with respect to all our accounts so I think the ability to accept the haircut and move on is pretty much. We are well positioned for that effect and we have been working to that and therefore we are quite comfortable overall in a provision coverage sense obviously the less we lose the better it is.

You were earlier highlighting that aside of these large top 30-40 accounts there are also some smaller companies that you do fear could turn NPA tell us what sectors these are in?

We were discussing broadly what could go wrong and when we discuss about that we have to discuss about a range of outcomes. So far as the larger accounts are concerned, those issues are now well known and understood, some actions have been taken and we have as far as possible been able to absorb as much as coverage is possible and hoping that as and when the resolutions happen we are well position to take the haircut and move on.

As far as the smaller accounts are concerned they are largely in the SME sector, they are granular, they are distributed, and therefore the managing of that is very different from managing of the larger portfolio. It has to be a much more effort across the organisation and that is really what it is. It is a much more distributed portfolio and therefore the managing of the risk of the distributed portfolio is quite different from managing NPAs on large accounts but to that process we have set across a fairly strong centralised credit process so we have a central collection I mean call centre and collection process.

We are building a lot of behavioural score to anticipate stress ahead of it comes and so we are also preparing for the fact that if the accounts risk with the accounts of large accounts are kind of identified and kind of parameterised then we need to ask what are the kinds of risk that exist in the balance sheet and then we need to prepare for them if we are not already been prepared. So the management of the small account is very much been there and we are getting better at it.

You have already guided for a figure for your gross NPAs where do you see your net NPAs headed?

I do not want to it is too early to give a certain number all I am trying to say by saying we are going to have about Rs 3000 crore on gross NPA. We are looking at the Rs 3000 crore NPA as a maximum downside that might exist from this point of time.

My understanding of your top 50 NPA accounts is that that is at 150 billion you have only provided for about 75 to 76 billion what happens to the remaining?

Our coverage ratio is close to 54% on the top 50 accounts and many of these top 50 accounts have plant and machinery, production facility etc. So across the portfolio we do not have a loss of greater than 50% and it is an extremely conservative interpretation.

If it moves up by 4% or 5%, we still have the ability to be able to absorb it by virtue of the organic capital we are generating. So the NPA numbers and all of that are kind of embedded in our portfolio much of this happened before I came. We are focussing on the growth because sooner than later the growth would be back on the agenda and therefore we are preparing ourselves for the growth story.

With this existing gross NPA guidance, do you see a repeat of what missed the mark approach?

We had indicated a kind of a slippage of about Rs 15000 crore and a recovery number of Rs 10000 crore and a forecast between Rs 45000 to Rs 50000 crore that was pretty much there from the very starting point. Now the flow of provisions and flow of accounts into NPAs not a linear or it cannot be very consistent quarter to quarter some of them as you know they are lumpy accounts and then when things move they could be high in one quarter it has kind of slower and less in the next quarter so you cannot kind of take the number and divide by 4 and say you done a great month and you done a bad month, it is not so you got to look it over a period of time and when we look at over the period of time across all indicators we had indicated something like 11000 crore on operating income of pre-provisions earnings operating income.

We are within the range with respect to the NPA forecast we have done so I think the assumption that the point you are making that there has been inconsistency is exist in the sense that the NPA numbers, the movement on the NPA numbers have not been equal across each quarter but that is a very nature of these accounts and the way they collectively behave. So come back to the point I think we must what I am trying to say is listen

We are now trying to switch ourselves to get into a growth mentality, we got our transformation programme going, it is gathering momentum and then we are getting ourselves future ready. There are some legacy problems that exist and they continue to remain till fully resolved; we are taking provisions and covering them. There can always be a negative and a nasty surprise but we are well protected. We have absolute amount of uncovered NPAs of Rs 18000 crore only and our operating income is fairly strong to be able to take any kind of risk that happen.

We are not looking for any other infusion or support from the government as far as capital is concerned; down the year we might need more capital but that would be growth capital and that is good capital to raise. So overall we are fairly in comfortable position. There could be volatility but we are going to come out strong during the course of this year.

When do you think corporate growth will come back?

We as a bank need to keep focussing on reducing the competitive gap between us and the best of competitors. We must aspire to be ahead of the industry curve and towards this end we have to do the kind of changes that are required whether it is with respect to technology or process or people capability. It is a two-three years exercise and we are making progress.

The second thing is overall the macroeconomics are looking good, monsoon is expected to be normal given all of these things and the macroeconomic stability we should look at an overall pick up in the economic growth and together we need to, we would like to see our share of the growth as well.

Three the way the banks are today structured and the fact that clients are more and more wanting to do with fewer institutions than 20 banks in the consortium we see an obvious consolidation opportunity being there which should push up the credit growth.

Finally as far as corporate credit is concerned we have grown by about 11% on a sequential basis and that is a good number as we know the first and two quarters of every year turns out to be a little bit slower than it starts picking up and so we expect that cycle to somewhat remain. So overall our sense is our corporate portfolio should grow partly on account of the fact that the market itself will be growing and also because there is enough opportunity for us to increase the market share because of the low level of exposures we have on most accounts and also because of the kind of consolidation that we see happening with large clients preferring to work with fewer banks.

There are downside risks as is the case everywhere we have to manage them but for all the things that can go wrong we have adequate operating income to take care of the downside so we have to watch this space and we need to keep moving on the path we have set ourselves in.